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| Future of South Africa Property Looks Positive |
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2006 was a relatively good year for property in South Africa, and even though the appreciation figures were not as high as previous years, some areas around the country have continued to outperform the national average
Elite and sought after suburbs in both Johannesburg and Cape Town have been faring exceptionally well. For example, according to Knowledge Factory's SAPTG statistics, Llandudno has seen a yearly growth of 38,06% for the year 1 November 2005 to 31 October 2006,
while Westcliff has seen appreciation of 51,58% during the same period. This trend is expected to continue, even with all the warnings of additional interest rate hikes. Absa's latest House Price Index notes that a nominal house price growth of 12,7% year-on-year was recorded in October compared to the revised growth rate of 13,5% in September. This brought the average price of a house in the middle segment of the market to R830 700.
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| Lower-Priced Houses Still Offer Best Yields |
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The growing wealth in South Africa’s leafy suburbs is now definitely trickling down to lower-priced neighbourhoods, including townships
Evidence to support this conclusion is that lower-priced houses continued to grow faster than those in the middle- and upper-priced sectors during the third quarter of 2006, according to the latest Rode’s Report on the state of the property market. The relatively stronger performance of lower-priced houses is confirmed by the FNB Residential Property Barometer for 2006:4, which shows that during the last year, houses priced under R500.000 performed much better than their more pricey counterparts.
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| Residential Market Still A Strong Bet |
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If interest rates increase marginally, the market should remain firm in terms of both demand and price growth
Real estate agents are expecting the residential property market to deliver a solid performance next year. Although the heady days of late 2004 — when property price growth peaked at more than 35% year on year — will not be repeated, estate agents are upbeat about property prospects.
Seeff Properties chairman Samuel Seeff thinks the market will have another good year “across the residential market”. But Seeff says the middle market, where units are priced between R1m and R3,5m, and which is dependent on buyers obtaining bonds to finance purchases, may have less growth than the top end because of the rising interest environment.
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| Foreign Property Investment Crucial |
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The sale of the landmark V&A Waterfront to a foreign consortium is likely to act as a catalyst to further foreign investment in South Africa
2010 has made foreign investment in South Africa property a viable
long-term investment that will benefit the country.
According to Alastair Collins, chief executive of Davis Langdon & Seah International's Global Board and managing partner of the International Group that operates throughout Europe, the Middle East, Africa, Asia, Australia and
the US, nothing is more topical or pertinent to South Africa than the sustainability of
international investment in its property.
"South African property is at centre stage," he say,
"and the Star Trek tractor beam of 2010 is a big draw."
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| Higher Interest Rates to Weigh on the Housing Market |
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Property Trends - Mortgage Advances
Volatility in
the rand exchange rate and international oil prices, together with increasing
inflation,
prompted the further increase in interest rates. PPI inflation surged to 10% in October
(9% in
September), while CPIX inflation came in at 5% in October (5,1% in September).
Other factors
which also contributed to the higher rates include record-high levels of
household debt as a
result of continued strong growth in private sector credit extension
(27,5% year-on-year (y/y)
in October), largely driven by mortgage advances growth of
30,9% y/y; the huge trade deficit
of R12,9 billion in October, which will contribute to the
current account deficit remaining at
a level of above 5% of GDP in the fourth quarter; buoyant manufacturing production and retail
sales growth, which confirmed that demand is still resilient; and relatively strong real GDP
growth (4,7% at a seasonally adjusted annualised
rate) in the third quarter.
| Absa Group Economic Research, 07-12-2006 |
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| Declining Trend in House Price Growth Continues |
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Property Trends
Nominal house price growth has been in a downward phase for the
past two years after peaking at 35,4% year-on-year in October 2004. In November 2006, nominal
price growth of 12,7% year-on-year was recorded (13,3% in October). The average price of a house
in the middle segment of the market (see explanatory notes) came to R841 000 in November. The
average nominal growth in house prices was 14,6% year-on-year in the period January to November
this year.
| Absa Group Economic, 06-12-2006 |
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| Affordability of Property is Key |
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It seems affordability is a key factor in the market with the lower-end being the star performer
The South African residential
property market has slowed down somewhat in the last year, but there has been increased
confidence in the lower-end of the market, with investors buying homes which are affordable,
rather than those in the top bracket which are over-priced. Upper-top-end property sales have
been good and bad — there has been a lot of foreigner spending here and we expect to see a good
year ahead, but the top-middle-end has not been as vibrant, with few buyers chasing the market.
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| Property Sales Still Booming |
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Property barometer lists the best and worst performing price growth suburbs
Properties worth nearly R19bn in the price
bracket below R2,5m each were registered at the Deeds office last month.
This is the second
highest level since a peak in November 2005, when the value of properties registered was
R19,8bn.
“Activity like this shows the property market is not cooling,” said Ed Grondel, FNB’s
CEO of Homeloans.
In spite of the latest rate increase, he continued, the residential property
market has remained relatively stable.
“The rate hikes have been absorbed and have had little
impact on market activity and sentiment,” maintained Grondel. He attributed positive market
sentiment to the summer months and more realistic property prices.
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| Garden Route Now A Buyers Market |
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This season we can expect a wave of savvy investors looking for bargain holiday homes along the Garden Route as serious sellers begin re-adjusting prices to fit the market
Tim Kirby of Lew Geffen Sotheby's International Realty in George reveals stats drawn from SAPTG for the periods January - August 2005 and compared these with the same period for 2006. George is 27,78% down on number of transfers, Wilderness is 37,14% down and Great Brak River is 45,42% down. These figures are echoed in Plettenberg Bay with registered transfers down by 25% this year.
"Three exclusive gated country estates we are currently marketing in George - Oaklands Bridge, Cherry Creek and Soeteweide – all offer outstanding value, with stands starting at R489 000, and as a result these have sold out relatively quickly. On all three estates, just outside of the George's CBD, spacious new homes are now under construction starting in the early R2 millions and we have seen similar demand for these properties.
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| Victoria & Alfred Waterfront Gets $1bn Boost |
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The Dubai World and London & Regional Properties consortium has announced plans to invest more than US$ 1 billion in the V&A Waterfront over the next four years, following its successful purchase of the development last month
The consortium has outlined a three-stage development strategy which will see improvements to the Waterfront starting immediately.
The first stage, over the next six months, will see landscaping and beautification measures, additional car parking space, commercial facilities and improvements to pedestrian access to the area.
The second stage, over the next three years, will ensure the V&A Waterfront is one of the highlights of the World Cup 2010, with the development of new hotels and resorts, creation of promenades, and entertainment areas, marinas, new shopping developments and new apartments and offices.
The third stage will see the development of new facilities to consolidate V&A Waterfront’s status as a leading global resort, with potential elements including a new yacht club and further marina development, a cruise ship terminal, a train station and improved connections to the airport.
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